Dealing with the Duck

RAP’s Mike Hogan and Bentham Paulos, of America’s Power Plan, describe market design ideas for dealing with increased system variability in the January 2014 edition of Public Utilities Fortnightly. Renewables and demand-side technologies have some features that will disrupt traditional energy markets as they grow. However, as a package, they present a very different way of running the grid, with greater efficiency, energy security, and lower emissions. Market designs need to evolve to accommodate innovation and clean energy. The authors suggest making markets larger and faster, treating demand-side options the same as supply-side, opening the market to more participants, and buying the services needed to run the grid in a more renewable future. This can include paying for fast-ramping services, creating more accurate price signals that mean more money for resources that are flexible and fast acting and less money for those that aren’t, and allowing demand response to bid into energy, services, and capacity markets. Once the way money flows in the markets more accurately matches the needs of the system, the move toward a clean energy future will be much smoother, cheaper, and more secure.

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State and federal utility regulators have traditionally controlled the electric power industry through their decisions. But rapid technology change means cleaner, lower-cost, and more resilient options for meeting customers’ energy needs are or soon will be available. Customers may soon have cost-effective options to meet their own energy needs through transactive platforms and markets. Regulators...